In its more proflific days, this blog made frequent sport of traditional publishers bemoaning the fact that there is no way to make money online, which it finds kind of hilarious given that Google and Facebook are two of the most highly valued companies.
Say what you want about AOL, at least its leaders never made that claim. They may have a new business model every 36 months but they don't try to claim the deck is stacked against them.
J.P. Mangalindan of Fortune Magazine had a column last week about one of AOL's more recent strategic shift, local news via "The Patch," and how that isn't exactly working out either, getting the money quote up front.
The math around Patch has always been tricky. In two years, it rapidly expanded to 863 sites, from Agoura Hills, California to Woonsocket, Rhode Island. Content is supplied by 1,000 professional journalists and some 14,000 bloggers. AOL has poured $160 million into the venture, despite paltry revenues. In 2011, it made just $20 million from Patch. "Basically, there [were] two ways to do it: get the product perfect in one market or go for a land grab approach," explains a former AOL executive directly involved in the company's strategy. This executive, who declined to be identified, says management opted for the latter, spending lavishly to expand and hire staff. "They went all in before they perfected the product and, in retrospect, that wasn't ideal."
When you have a lot of money, throwing it at your problems must be an irrestible urge.
Mangalindan gives AOL its due for a decent report last quarter but also quotes an old friend, Saul Hansell, former technology reporter for The New York Times who jumped to AOL a while back, who sure sounds like he's whistling past the graveyard.
Not only is Armstrong's dream of a thriving hyperlocal news hub at stake, more than 1,000 jobs are too. "I don't know for sure if Patch will pay off," admits Saul Hansell, former Programming Director for AOL's Seed.com and one of Armstrong's first prominent journalistic hires. "But now that they've built it, as a shareholder, I want them to keep it going for a few more years at least to see if they can capitalize on its enormous potential."